Is Apple Inc. (NASDAQ:AAPL) off to the races again? That’s what analysts seem to think after Tuesday’s big event. Multiple firms issued reports praising every aspect of the event, especially the new products.
The UBS team thinks Apple’s revenue growth will accelerate again amid a strong upgrade cycle, while JPMorgan analysts believe that the Apple Pay service will drive demand for more upgrades. Barclays analysts like the average selling prices of the new products, while those at Jefferies say Apple Pay could end up having a negative impact on eBay Inc (NASDAQ:EBAY)’s PayPal.
Big iPhone 6 upgrade cycle expected
Before Apple even showed off the iPhone 6, analysts had been predicting that the iPhone 6 cycle would be huge. Now that they’ve seen the new phones, they’re even more convinced than ever. In a report dated Sept. 9, 2014, UBS analyst Steven Milunovich said the 24 hours of talk time on the iPhone 6 Plus battery could boost demand for the high-end phablet. He thinks availability of the phablet-sized iPhone will be limited in the beginning, despite plans to ship it along with the iPhone 6 to 115 countries starting Sept. 19.
In their report dated Sept. 9, 2014, Barclays analysts Ben Reitzes and Ryan Jones said they like the pricing structure Apple has set forth for the new iPhones. They think the average selling prices should protect margins while also keeping them fairly close to what consumers were paying in the past. In the iPhone 6 product cycle, the Barclays team also sees “big volumes and big margins.”
Apple Pay could drive demand
In another report also dated Sept. 9, 2014, JPMorgan analyst Rod Hall and his team said they think the new Apple Pay service could drive demand for the iPhone 6 and 6 Plus because it requires the newer models to work.
Apple Pay utilizes near field communication, as expected, and integrates into the Passbook app. The service uses tokens so that credit card information is not stored on devices or revealed to merchants at the point of service. UBS analysts don’t see a significant new revenue stream for Apple in the payments service. Instead, they think the service simply further differentiates its ecosystem from Android.
In their report dated Sept. 9, 2014, Jefferies analyst Jason Kupferberg and his team said Apple Pay emphasizes speed and convenience over all else. They’re unsure that these two elements will be enough of a value proposition to result in widespread adoption among consumers.
Will Apple Pay disrupt the payments industry?
In Jefferies’ view, the service could be neutral to positive for networks and terminal makers and neutral to negative for acquirers and card issuers. They assume most transactions conducted through Apple Pay will replace transactions made with physical cards, which would convert some transactions from cash or check to Apple Pay. That would be a positive for networks and issuers.
On the other hand though, they say issuers might have to concede some “transaction economics” to Apple. And in terms of online transactions, they think Apple Pay could threaten PayPal if it gains a foothold.
On the Apple Watch
Analysts from all four firms were impressed with the Apple Watch as well. The Barclays team said they think Apple has successfully balanced aesthetics with functionality, so they expect demand to be “huge.” Both the Barclays team and the JPMorgan team mentioned the controls on the watch, particularly the digital crown and haptic feedback.
The UBS team likes the ability to respond to text messages received on an iPhone using voice through the Apple Watch.
